Monthly Archives: September 2011

Global Economy Growth Downgraded by IMF

As reported by Steve Schaefer in Forbes, the International Monetary Fund dialed back its outlook for the global economy Tuesday, and now projects worldwide growth of 4% in 2011 and 2012, down from 5% in 2010.

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Some slowdown was anticipated, but the IMF expected it to come from an unwind of the unprecedented stimulus efforts launched to counteract the financial crisis over the last three years.  Instead, “a barrage of economic shocks in 2011 combined with other factors for a worse than anticipated outcome.”

Chief economist Olivier Blanchard warned that “strong policies are urgently needed to improve the outlook and to reduce the risks,” and the IMF said the economy is in “a dangerous new phase” marked by weaker activity and a sharp decline in confidence.

The associated issues will be discussed more in detail at  Golden Networking‘s China Leaders Forum 2011, October  7.

The updated forecast anticipates U.S. growth of just 1.5% in 2011 and 1.8% in 2012, with euro area growth of 1.6% this year falling to 1.1% next year. Emerging and developing economies will also grow slower than previously anticipated, but remain the workhorses of global growth, the IMF anticipates.  China is expected to grow at a better than 9% clip this year and next, while Brazil is expected to maintain annual growth better than 3.5%.

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Is China Willing to Open its Economy to Foreign Investment

As reported by Financial Times’s Joshua Chaffin,  China’s refusal to open its economy to foreign investment could backfire by encouraging European politicians to curb Chinese investments on the continent, the European Union’s trade chief has warned.

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Karel de Gucht, the trade commissioner, told a business conference in Brussels that “important sectors in  China remain closed or restricted to EU investors”.

He added: “The fundamental imbalance between our openness and  China’s restrictiveness plays into the hands of those in Europe who see Chinese investments as a threat and argue that we should selectively screen Chinese investments into the EU.”

Mr De Gucht’s warning comes at a time when the EU’s debt crisis has increasingly led cash-strapped governments to look to China for funding, but has also heightened fears that they may lose valuable national assets in the process.

The associated issues will be discussed more in detail at  Golden Networking‘s China Leaders Forum 2011, October  7.

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To Purchase More European Bonds or Not

As reported by Jamil Anderlini in Financial Times, Xing Fushan spends his days selling electric scooters in the suburbs of Beijing and understands little about high finance but he has strong opinions about Chinese purchases of bonds issued by crisis-hit European countries.

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“ China shouldn’t buy European bonds, because the US can’t even pay their debt, so in the end,  China will lose money,” the 30-year-old salesman says. “With so much money wouldn’t it be nice if the government could do some real good things for the [Chinese] people?”

The idea that  China might be willing or even able to bail out debt-laden Europe by purchasing huge amounts of potentially worthless bonds is one that elicits disdain from most parts of Chinese society.

“I don’t think any country can be saved by  China in today’s world,” Li Daokui, member of the monetary policy committee of  China’s central bank, told a panel at the World Economic Forum in Dalian,  China, on Wednesday. “Countries can only save themselves by pushing through reforms.”

The associated issues will be discussed more in detail at  Golden Networking‘s China Leaders Forum 2011, October  7.

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China Bond Yields at Three-Year High Amid Resource Grab

As reported by Bloomberg News, the highest funding costs since 2008 may make it more expensive for  China’s state banks to lend to commodity producing nations, as the world’s fastest-growing major economy tries to secure natural resources to fuel growth.

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Five-year borrowing costs for the so-called policy banks surged 70 basis points to 4.6 percent this year and touched a three-year high of 4.68 percent on Aug. 4,  China bond prices show. Top-rated Indian lenders pay 9.45 percent on their five- year debt, compared with 8.94 percent at the end of 2010, data compiled by Bloomberg show.

The government relies on  China Development Bank Corp. and Export-Import Bank of  China to lend to resource-rich nations such as Brazil, Kazakhstan and Venezuela in exchange for commodity and energy supplies. Borrowing costs surged after the central bank raisedinterest rates to control inflation and lenders increased provisions against loans for local governments. The value of banks’ dollar loans are falling as the yuan strengthened 3.3 percent against the currency in 2011.

The associated issues will be discussed more in detail at  Golden Networking‘s China Leaders Forum 2011, October  7.

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Novel Unique Relationship between Emerging-Market Nations and British

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As reported by Economist, around four centuries ago, British capital started flowing into India, creating the East India Company, and laying the foundations of the empire. Now capital is flowing in the other direction. In the past ten years the Tata group—which ranges from steel and engineering to chemicals, telecoms and tea—has spent $15 billion buying up famous British firms. Tetley tea was followed by Corus (formerly British Steel) and Jaguar Land Rover (JLR), maker of two of the most quintessentially British cars, and Brunner Mond, a founder of what was (until it went the way of all empires) Imperial Chemical Industries. As a result of these purchases, Tata is now Britain’s biggest industrial employer (see article).

To some extent this is merely the British chapter of a wider story: the rise of emerging-market giants. The number of companies from Brazil, India, China or Russia on the Financial Times 500 list trebled in 2006-08 from 20 to 62. Emerging-market champions are stamping their names on almost every area of business: Brazil’s Embraer in aircraft, China’s Huawei in telecoms and India’s Tata in just about everything, from cars and chemicals to consumer products and IT. In 2010 emerging-market firms accounted for a third of the world’s $2.4 trillion tally of mergers and acquisitions.

The associated issues will be discussed more in detail at  Golden Networking‘s China Leaders Forum 2011, October  7.

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Great Wall Motor May Raise Up to Billions in Shanghai Share Sales

As reported by Bloomberg News, Great Wall Motor Co., China’s biggest pickup truck maker, said it will raise as much as 4.26 billion yuan ($666 million) in its Shanghai share sale, more than the company originally sought. The related issues will be discussed more in detail at Golden Networking‘s China Leaders Forum 2011, October  7.

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Great Wall will sell 304.2 million shares at 13 yuan to 14 yuan each, the company said in a statement to the Shanghai Stock Exchangeyesterday. The Baoding, China-based automaker had planned to raise as much as 3.17 billion yuan, according to its prospectus.

The maker of Hover sport-utility vehicles is raising funds to pay for expansion amid a 12 percent slump in the benchmark Shanghai Composite Index this year. The company said last month it’s seeking money to accelerate project construction and boost the output of engines, transmissions, axles and brakes, aluminum alloy cast parts, decoration and lighting.

Great Wall is selling stock as automobile sales in China slow from last year’s record 32 percent gain after the government removed sales-tax breaks and rebates for rural purchases. Total vehicle deliveries expanded 3.3 percent in the first eight months, according to the China Association of Automobile Manufacturers.

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